The Members of
M/s. BKV lndustries Limited "and reduced"
Report on the Financial Statements
We have audited the accompanying financial statements of M/s. BKV Industries Limited"and reduced" ("the Company") which comprise the Balance Sheet as at31st March 2016 the Statement of Profit and Loss the Cash Flow Statement for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
Our responsibility is to express an opinion on these financial statements based on ouraudit We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements arc free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the financial statements. Opinion
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples general ly accepted in India of the:
(i) in the case of the Balance Sheet of the state of affairs of the Company as at 31st March 2016 and
(ii) in the case of Statement of Profit and Loss of the loss for year ended on thatdate and
(iii) in the case of Cash Flow Statement of the cash flows for the year ended on thatdate.
Emphasis of Matter
We draw attention to the following matters in the Notes to the financial statements:
a) Note 32 to the financial statements which describes the uncertainty related to theoutcome of the lawsuit filed relating to the Non-Agricultural Tax appeal by theGovemment/farms.
b) Note 31 in the financial statements which indicates that the Company has accumulatedlosses and its net worth has been substantially eroded the Company has incurred a netloss during the current year and in the previous year and the Company's currentliabilities exceeded its current assets as at the balance sheet date. These conditionsindicate the existence of a material uncertainty that may cast significant doubt about theCompany's ability to continue as a going concern. However as the Company has consistentoperating lease income the accounts have been drawn up on going concern basis.
Our opinion is not qualified in this matter.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in theAnnexure-A a statement on the matters specified in paragraphs 3 and 4 of the Order.
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
(e) The going concern matter described in sub-paragraph (b) under the Emphasis ofMatters paragraph above in our opinion does not have an adverse effect on thefunctioning of the Company.
(f) On the basis of the written representations received from the directors as on 31 stMarch 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31 st March 2016 from being appointed as a director in terms ofSection 164 (2) of the Act.
(g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - ReferNote 26 to the financial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any and the Company did not have anylong-term contracts including derivative contracts for which there were any materialforeseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
|I ||for Garlapati & Co |
| ||Chartered Accountants |
| ||Firm Regn. No. 000892S |
|Place: Guntur. || |
|Date: 27th May 2016 ||G. Satyanarayana |
| ||Partner |
| ||M.No: 022101 |
ANNEXURES TO THE INDEPENDENT AUDITOR'S REPORT
Referred to in Paragraph of Report on Other Legal and Regulatory Requirements of ourreport of even date on the Accounts of the Company for the year ended 31st March 2016.
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) The fixed assets have been physically verified by the management during the yearwhich in our opinion is reasonable having regard to the size of the company and thenature of its assets. No material discrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties of the Company shown under theFixed Assets schedule are held in the name of Company.
(ii) As the company has given the farm on operating lease and it does not hold anyInventory Paragraph 3(2) is therefore not applicable to the company.
(iii) The Company has not granted any loans secured or unsecured to companies firmslimited liability partnerships or other parties covered in the register maintained underSection 189 of the Act.
(iv) The company has not given any loans/investments/guarantees to which provisions ofsec. 185/186 are not applicable - Hence Clause 3(v) of the order is not applicable.
(v) The Company has not accepted deposits during the year. Hence Clause 3(v) of theOrder is not applicable.
(vi) As the companies firm given on operating lease and no other manufacturing activityis undertaken during the financial year 2015-16 maintenance of cost records u/s48 doesnot ariase. Thus paragraph 3 (6) of CARO is not applicable to the company.
(vii) (a) According to the information and explanations given to us and records of theCompany examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues including provident fund employees' state insuranceincome-tax sales-tax service tax duty of customs duty of excise value added taxcess and any other statutory dues to the appropriate authorities. There are no arrears ofundisputed statutory dues outstanding as at March 31 2016 for a period of more than sixmonths from the date they become payable.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of income tax or sales tax or service tax orduty of customs or duty of excise or value added tax cess have not been deposited onaccount of any dispute.
(viii) According to the information and explanations given to us and records of theCompany examined by us the Company has not raised any loans from financial institutionsor banks or government and no dues to debenture holders and therefore paragraph 3(8) isnot applicable to the company.
(ix) The company has not raised any money by way of initial public offer/ further offerand term loan during the year. Paragraph 3(9) of the order is not applicable to thecompany.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to fee information and explanation given to us we have neither observed anyinstance of fraud by fee Company or any fraud on fee Company by its officers or employeesof fee Company nor have we been informed of such case by the Management during fee year.
|(xi) The Company has paid managerial remuneration as per fee provisions of Section 197 read wife Schedule V to fee Act ||Partner |
|(xii) The Company is not a Nidhi Company and hence Clause 3(xii) of fee Order is not applicable. ||M.No: 022101 |
(xiii) All the transactions with the related parties are in compliance with Section 177and 188 of the Act where applicable and the details have been disclosed in the FinancialStatements as required by the applicable accounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or frilly or partly convertible debentures during fee year under review and henceClause 3(xiv) is not applicable.
(xv) According to the information and explanation provided to us and based on ourexamination of records the Company has not entered into any noncash transactions withDirectors or persons connected wife him and hence Clause 3(xv) is not applicable.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934 and hence Clause 3(xvi) is not applicable.
| ||for Garlapati & Co |
| ||Chartered Acc ountants |
| ||Firm Regn. No. 000892S |
|Place: Guntur. || |
|Date: 27th May 2016 ||G. Satyanarayana |
| ||Partner |
| ||M.No: 022101 |
To the Independent Auditor's Report of even date on the Financial Statements of BKVIndustries Limited "and reduced"
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of BKVIndustries Limited "and reduced" ("the Company") as of March 31 2016in conj unction with our audit of the financial statements of the Company for the yearended on that date
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on guidance by Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all materia irespects.
Our audit involves performing procedures to obtain audit evidence about die adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontro Is material misstatements due to error or fraud may occur and not be detected.Also proj ections of any evaluation of the internal financial controls over financialreporting to future periods arc subj ecttothe risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 312016 based on internalcontrol over financial reporting criteria established by die Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued bythelnstituteofCharteredAccountants ofIndia.
| ||for Carlapati & Co. |
| ||Chartered Accountants |
| ||Firm Regn: No: 000892S |
|Place: Guntur ||G. Satyanarayana |
|Dated: 27-5-2016 ||Partner |
| ||M. No: 022101 |